Cross-Border Flow Analysis - Case Study for Food Processing Industry

strategic transportation

& tourism solutions

Cross-Border Flow Analysis Report 4:

Case Study for Company 4 (Food Producer)

Prepared forIndustry Canada

Prepared byInterVISTAS Consulting Inc.

8 July 2009

Cross-Border Flow Analysis Report 4: Case Study for Company 4 (Food Producer)

8 July 2009

i

Table of Contents

1. Introduction........................................................................................................................ 1 1.1 Overview .............................................................................................................................1 1.2 Methodology........................................................................................................................2

2. Firm Profile......................................................................................................................... 3

3. Value Stream Map.............................................................................................................. 4 3.1 Value Stream Glossary .......................................................................................................5 3.2 Current State vs. Future State Maps...................................................................................5 3.3 Processes and Timing.........................................................................................................9

4. Key Findings.................................................................................................................... 16 4.1 Summary...........................................................................................................................16 4.2 Findings.............................................................................................................................16 4.3 Quantitative Results ..........................................................................................................19

5. Border Crossing Costs ................................................................................................... 20


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1. Introduction

The purpose of this study is to determine and evaluate the experience of processing a transaction from initiation of an order to clearance at the U.S. border. This report will be followed by recommendations and alternatives to result in enhanced facilitation of trade from Canada to the United States.

The data collected from this report will help to identify the underlying causes of border challenges that may impact the competitiveness of Company 4 from a number of perspectives: regulatory, logistic and security. The study examines, measures and reports upon the various logistics, security and compliance costs for the company at the border, including more detailed examinations of the frequency of secondary inspections and the issues that trigger such incidents (i.e. regulatory compliance vs. border protection imperatives).

The following report is a case study for Company 4 - a food producer. This draft case study report is developed based on interviews and information received from the firm. While the findings reflect the issues faced by the individual organization, it is intended to demonstrate the challenges that other companies within the industry are faced with. The report includes the following: Value stream maps of cross border processes Descriptions of process steps for shipping goods across the border Matrix of key findings Explanations of key findings

1.1 Overview This report provides an overview of the following information:

1: Shipping Steps / Wait Time

2: Regulatory Requirements/Issues

3: Logistics Related Issues

4: Security Issues

5: Existing Programs & Initiatives to Address Issues

6: Compliance Cost Data

7: Observations/Gaps

Information included in this report will support the identification and analysis of top issues leading to significant challenges at the Canada-U.S. border. Further, it will allow for a better understanding of how border issues affect the competitiveness of companies, enabling an assessment of their


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impacts on North American supply chains. This information will lead to the development/proposal of potential options and solutions to eliminate unnecessary costs and delays at the border.

1.2 Methodology

The methodology used to develop this report is as follows:

1) Company Selection - Company 4 was selected as a food producer with much of its production crossing the Canada-US border. The case study is intended to show how typical food product shipments are made for those with and without meat ingredients.

2) Data Collection - In depth data collection was performed to qualitatively and quantitatively characterize the cross-border shipment process and to identify border issues. In this case, the process steps for two product types (meat and non-meat) with differing requirements were traced. The staff tasked with preparing border compliance documentation, ensuring inspection certification took place and labelling product were interviewed; a facilities and operation tour was conducted; food shipment forms and documentation were reviewed; the service provider was also interviewed; and the shipment reports for one year (2008) were examined. The rationale for one-year’s worth of data was that the economic downturn was felt to skew results on representing actual issues faced by Company 4.

3) Develop Value Stream Map - With the detailed processes outlined for the products, timing data and incident rates were associated to each step to develop the “current state value” stream maps.

4) Detail and Categorize Border Issues - The challenges faced by the company in shipping food products across the border as identified by the company and through the value stream mapping process were documented and categorized into one of the seven columns as outlined in the findings matrix.

This report is one of seven case studies developed. For ease of reference, the seven companies are as follows: Company 1 (Services Sector Involved in the Movement of Goods) Company 2 (Small to Medium-sized Enterprise) Company 3 (FAST Member) Company 4 (Food Processing Industry) Company 5 (Motor Vehicle Sector) Company 6 (Consumer Goods Industry) Company 7 (Chemicals Sector)

Companies provided data in confidence; as a result their names and descriptions are genericized and data collection results are provided in aggregate form only to protect commercial sensitivities.


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2. Firm Profile

Company 4 is a large food producer located in Central Canada with a number of warehouse and distribution facilities throughout the United States and Canada. Company 4 processes and packages food for a number of product lines at this Canadian location and are generally not considered perishable or highly time-sensitive items.

Orders for the product are generated to replenish stock at the warehouses that, in turn, are shipped to retailers. The individual products are small in size and are packaged in cases for retail sale with a number of cases per pallet. Company 4 ships truck loads of its product using a carrier selected by its service provider who also acts as its broker at the border.

There are two types of products that are relevant to Company 4:

Non-Meat: These products contain no meat but are subject to Food and Drug Administration (FDA) as well as normal Customs and Border Protection (CBP) requirements.

Meat: In addition to FDA and CBP, these products must comply with U.S. Department of Agriculture (USDA) requirements.

Company 4 holds the status Customs-Trade Partnership Against Terrorism (C-TPAT) “Partner” since its U.S. parent attained C-TPAT Tier II status. Carriers and drivers are mandated to be registered with the Free and Secure Trade (FAST) program when shipping to the U.S.


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3. Value Stream Map

Value Stream Mapping (VSM) is a process analysis tool that is used to represent the interaction between processes, operations and information for bringing a product order (or request for service) through to delivery of it. The concept originated a number of years ago through the Toyota Production System and is a key technique used in Lean Manufacturing. VSM is used to determine the value added and non-value added elements of a system. It provides a high level picture of product and information flows in order to develop improvement suggestions. Due to the nature of the products from Company 4, it was already familiar with process analyses tools comparable to VSM.

A value stream consists of the following elements: Supplier (start of flow) Customer (end of flow) Physical flow of product being mapped Information used by process transformation steps Information flowing between process control, supplier and customer

Value stream maps can help visualize the process steps required to make a product or provide a service and any waste that exists in the processes. It provides a view of the entire system so that any improvements can be made to better the overall flow rather than a limited area within it.

The symbols used in the value stream maps in this report are as follows:

Customer or Supplier

Delay (non-value added)

Process (value added) Flow of Product

Decision Point or Alternative Flow of Information

Transport

Information System

Elapsed time

Touch time Timing Chart


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The following section provides a glossary of terms used in the value stream maps.

3.1 Value Stream Glossary

The following definitions are used in value stream maps and Lean principles.

Term Definition

Elapsed Time The time it takes to complete the tasks to make a product or provide the service including delays and interruptions within the process. Also known as throughput, turnaround, flow or lead time.

Non-Value-Add (NVA) Any operation or activity that consumes time and/or resources but does not add value to the service provided or product sold to the customer. (Some are necessary - i.e., regulatory requirements - while others are unnecessary.)

Queue or Delay Time Non-value added time spent waiting for a process.

Takt Time Average demand for product or service expressed in units of time. Sets the pace for the operation; all processes need to produce at rate of demand. The calculation of takt time is available work time per day / customer demand per day.

Touch Time The total time spent performing tasks to complete the product or provide the service without delays or interruptions within the process.

Transport Physical movement of goods from one place to another. If the company performs the transportation, queue time is not included in the transport time. Otherwise, delay time is included in transportation time.

Value-Add (VA) Any operation or activity the customer values (and would be willing to pay for).

Waste The elements of the process flow (or lack thereof) that add no value to the service provided.

3.2 Current State vs. Future State Maps

Current state value stream maps are typically developed to document current process flows and identify potential points of improvement. Future state maps are developed from the current state maps to design a lean flow that eliminates waste and improves the process flow. There are three basic Lean principles that are applied when designing future state value stream maps:


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Eliminate Unnecessary Non-Value Added Reduce Necessary Non-Value Added Optimize Value-Added

In general, these are targets for improvements that can be achieved six to nine months out. Some of the tactical actions that can be taken include: Eliminate steps / handoffs Merge steps Create parallel paths Implement pull if flow is not possible Reduce / eliminate batches Improve quality Create standard work Create an organized, visual workplace Eliminate unnecessary approvals / authorizations Stop performing nonessential (NVA) tasks from the customer’s point of view Co-locate functions based on flow; create teams of crossfunctional staff Balance work to meet takt time requirements

The following diagrams show the current state value stream maps for Company 4 for two different types of food shipments: non-meat and meat. Future state value stream maps are outside of the scope of this study and were not developed. Company 4 uses a third-party logistics registered with the Free and Secure Trade (FAST) program. The firm has a very robust method of tracking trade and border compliance issues and this was used to generate the following maps.

US Warehouse

NOTIFY ORDER TRAILER PREPARE DOCUMENTS

PICK AND STAGE LOAD CBP & FDA

PROCESS

CREATE & PRINT PICK-LIST

CARRIER

BROKER

REQUIREMENTS REPORT

PLAN ORDER

ITo

Border

CONVEYANCE INFO

- 15 min.- check SAP for available

product (or walk to warehouse), and enter order

- create line-up (Excel)

- 5 min.- email to warehouse

manager:- Shipment date- PO #- B/L #- product code- quantity

- 1st notice to carrier (impending shipment)

- 10 min.- B/L#

- 30 min.- check product,

and print pick-list

- 15 min.- carrier info- commercial invoice

(NAFTA Form 1) x 3- VICS B/L x 1- pallet sticker- blank FDA pre-arrival

notice form

- 30 min.- load truck - driver signs bolt

seal form- warehouse

manager signs gate pass

- trailer #- seal #- Signatures of

shipper and driver on shipping docs

- gate pass with driver signature

COMPANY 4

Food (Non-Meat) Shipment

March 5, 2009

email

To lift truck driver

STAGE IN SAP

- 30 min.- use delivery # to

assign pallets in SAP

Telephone or email:Order complete

1 – 4 hrs

Firm shipment notice

Touch time: 195 min.

Queue time: 13 – 16 hrs

30 min. 45 min. 120 min.

12 hrs + 2 – 6 hrs1 – 4 hrs

ABI/ACS

ACE

Entry data

eManifest

- see separate map

- 2 hrs allotted due to FDA process

Transport time: 2 – 6 hrs.

1st notice

GATE CHECK & SEAL

Warehouse

MRP

- 30 min.- scan each pallet

when staged- day shift only

(6am – 2:30pm)

- 15 min.- security checks

truck and gate pass

- bolt seal is affixed

To gate

- city driver takes load to terminal

- wait until appointment made by carrier with FDA (may be overnight)

- long-haul driver takes load to border

FDAFax appointment, load info, driver info

Placecopyin cab

I

Carrier

Importer of Record

Ultimate ConsigneeACE

Broker

Impending shipment

I Primary Processing

(incl. cab check for non-FAST)

77% of shipments are releasedafter primary processing

Depart

30 min

3 min.

I iHouse(meat inspection)

15 min. 5 min. - 2 hrs

I Open Doors(3%)

1 hr3 – 4 hrs

I VACIS

30 min90 sec

IVACIS

A. RandomB. BlitzC. Directed

1 hr90 sec

Finding

NOI

Hold for Compliance

(at CBP compound)

30 min6 – 24 hrs

IDetain

(Must be exported if no decision has been made after

30 days)Detain up to a max. of 30

days 0 min

I Refuse and Return

1 – 2 hrs0 min

I Seize Shipment

1 hr.0 min

YES

CBP disposesOn-site or off-site

- destroy- donate- auction

I Hold for Compliance

(At CFS – space constraint at CBP)30 min

1 – 2 days

I De-van(at CES)

24 hrs8 – 12 hrs.

I

Conditional Release

(may lead to Request for Redelivery)

30 min.0 min

IDemand for Redelivery to CBP

1 – 2 days0 min

Finding

NO

Return to Canada

July 8, 2009

YES

eManifest- 1 hr prior to

arrival- ½ hr for FAST

OR

Entry DataCF3461

Submit prior to arrival

ReleaseResult

To Secondary Processing

When directed to VACIS

To Secondary Processing

Initial Determination

I

1 hr15 min.

On-site MitigationReturn Property

- pay fine

20%

YESFinding

PORT LIMITS – within 25 miles of border crossing

Arrive at border

ABI/ACS

NO

Return to Canada

Redeliver

COMPANY 4Customs and Border

Protection Truck Process


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3.3 Processes and Timing

3.3.1 Non-Meat Shipment

# Step Observations Timing

Product Flow

1 Pick and stage All US bound shipments are held in the warehouse until a pick order is issued. Order is picked and staged in the shipping area by the designated bay door. Each pallet is scanned during staging.

30 min.

2 Wait Wait for trailer to arrive. All trailer drops must be before the end of the day shift (2:30pm), to ensure that authorized personnel are available during loading, for security processes.

1 – 4 hrs.

3 Load Load trailer. Sign gate pass, hand paperwork to driver, and provide bolt seal.

30 min.

4 Gate check and seal

At gate, security checks the truck. The driver seals the trailer.

15 min.

5 Drive to border

Load is usually taken to terminal by city driver. A long-haul driver takes the load to the border. An appointment with the Food and Drug Administration (FDA) is made prior to driving to the border. Depending on port selection and time of day, it can take anywhere from 2 to 6 hours before the truck arrives at the border.

2 – 6 hrs.

6 CBP and FDA processes

A food shipment must be inspected by the FDA under bioterrorism regulations. Due to FDA working hours, the trailer may wait over-night before departing (12 hours). The border crossing process usually takes 2 hours.

2 - 14 hrs.

Information Flow

1 Plan order Planner gets requirements report from Material Requirements Planning (MRP) system, and checks availability in SAP. Use Excel to line up individual shipments. Email file to transportation Coordinator.

15 min.

2 Notify Transportation Coordinator notifies third party logistics of impending shipment. Sends an email to the Warehouse Supervisor with line-up and planned shipping time.

5 min.


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3 Create and print pick list

Warehouse Supervisor uses the warehouse system to create and print a pick list. A lift truck driver is assigned to pick an order.

30 min.

4 Stage in SAP As the order is picked, the lift truck driver scans each pallet. Once picked, the load is staged in SAP, thus removing it from available product.

30 min.

5 Order trailer The Transportation Coordinator is notified that the order is complete. The third party logistics provider is notified to deliver a trailer; the bill of lading number is provided.

10 min.

6 Prepare documents

Once loaded, conveyance information is transmitted to the Transportation Coordinator. The Transportation Coordinator prepares the required paperwork: - Carrier and trailer information - Seal number - Commercial invoice (NAFTA Form 1) x 3 copies - VICS bill of lading x 1 copy - A blank FDA pre-arrival form (which the carrier will use to schedule an appointment with the FDA for inspection at the border) - A pallet sticker (for Instruments of International Trade (IIT) purposes) to be placed on the bill of lading. The relevant information is faxed to the carrier and broker, for preparation of entry data and eManifest, and scheduling of an appointment with the FDA for inspection. Relevant documents are printed and given to the driver, for presentation at the border.

15 min.

Timing Summary

1 Touch-time 195 minutes, including 120 minutes at the border

2 Queue time 1 – 4 hours, depending on when a trailer is available

3 Transport time 2 – 18 hours, depending on which port is chosen, and when the trailer is loaded. If the FDA is not available for inspection, the trailer will be held at the terminal over-night.

4 Delay The FDA working hours are responsible for delays at the terminal, as well as for the inspection time at the border – minimum 2 hours, up to 16 hours.

PICK AND STAGE ORDER STICKERI I CFIA

INSPECTION I STAGE I LOAD CBP & FDA PROCESS

To border

REQUIREMENTS REPORT

PLAN ORDER

- 15 min.- check SAP for available

product (or walk to warehouse), and enter order

- create line-up (Excel)

ASSIGN HEALTH CERTIFICATE

NUMBERNOTIFY

CARRIER

BROKER

I-HOUSE

CFIA VETERINARIAN

CFIA

PREPARE & PRINT

DOCUMENTS

SIGN & STAMP DOCUMENTS

SHIPMENT ORDER

PRINT HEALTH CERTIFICATES

- 1 – 2 hrs- courier Health

Certificate to CFIA veterinarian for signature

CREATE & PRINT PICK-LIST

PRINT STICKERS

CONVEYANCE INFO

1 day 1 day 0 hrs.3 – 4 hrsIncl. wait for vet sign-off

- 10 min.- B/L#

- trailer #- seal #- Signatures of

shipper and driver on shipping docs

- gate pass with driver signature

- 5 min.- email to warehouse

manager:- Shipment date- PO #- B/L #- product code- quantity- indicate meat shipment

- 1st notice to carrier (impending shipment)

- 5 min.- assign Health

Certificate # to truck load

- inspector unlocks

- 30 min.- check product,

and print picklist- give to lift-truck

driver

- 80 min.- print 1/case + 1

for Health Cert.

- 15 min.- sticker present- cert# is identical

for all cases- paperwork is

correct

- CFIA Health Certificate

- Form 9540- Annexes for

bovine, mutton, chicken, etc.

- USDA health certificates

1st notice

- 20 min.- carrier info- commercial invoice

(NAFTA Form 1) x 3- VICS B/L x 1- pallet sticker- blank FDA pre-arrival

notice form- Annexes (bovine, chicken)- US Health Cert.- Form 9540 notification of

meat shipment

ABI/ACS

ACE

US Warehouse

Entry Data

Form 9540 faxed night before arrival to USDA Inspection Facility

COMPANY 4

Food (Meat) Shipment

March 5, 2009

- 2 hrs.- see separate

maps

- 240 min.- USDA meat

inspection- sign & stamp

Health Cert.- fax copy to

exporter

- 30 min.- load truck- driver signs bolt

seal form- warehouse

manager signs gate pass

15 min.

30 min. 240 min. 15 min. 30 min. 45 min. 120 min. 240 min

0.25 hr12 hrs.1 – 4 hrs0 hrs24 hrs.24 hrs.

Touch time: 690 min.

Queue time: 61 – 64 hrs

Fax Form 9540

3 hrs. to return

Firm shipment notice

GATE CHECK & SEAL

eManifest

Transport time: 2.25 – 6.25 hrs

FDA

FDA appointment

MRP

- 240 min.- place a sticker on

each case

- 15 min.- security checks

truck and gate pass

- bolt seal is affixed

To gate

2 – 6 hrs.

To inspection

- 30 min.- 30 min.- scan each pallet

when staged- day shift only

(6am – 2:30pm)

Place incab

COMPLETE

Email or telephoneOrder complete

I

12 hrs.

2 – 6 hrs+

Warehouse


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3.3.2 Meat Shipment


Product Flow

1 Pick and stage All US bound shipments are held in the warehouse until a pick order is issued. Order is picked and staged in inspection area. Each pallet is scanned during staging.

30 min.

2 Wait The CFIA inspector is only available for ½ hour around 7am. To print the necessary stickers, the inspector must unlock the CFIA computer, and allow the stickers to be set up, and the print job sent to the appropriate printer.

24 hrs.

3 Sticker A typical shipment of about 3,000 cases takes 240 minutes to sticker and check.

240 min.

4 Wait The shipment waits until the following morning, when the inspector is once again available.

24 hrs.

5 CFIA inspection

The inspection consists of checking that the sticker has been applied to each case, that all stickers for a shipment have the identical Health Certificate number, and that the paperwork has been correctly filled out.

15 min.

6 Wait Depending on lift truck availability, the completed shipment waits for movement to the staging area. Product waits up to 3 hours for veterinary signature to return.

3 hrs.

7 Stage The shipment is staged in a designated area by the assigned shipping bay door.

30 min.

8 Wait Wait for trailer to arrive. All trailer drops must be before the end of the day shift (2:30pm), to ensure that authorized personnel are available for security processes.

1 – 4 hrs.

9 Load Load trailer. Sign gate pass, hand paperwork to driver, and provide bolt seal.

30 min.

10 Gate check and seal

At gate, security checks the truck. The driver seals the trailer.

15 min.


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11 Drive to border

Load is usually taken to terminal by city driver. A long-haul driver takes the load to the border. An appointment with the FDA is made prior to driving to the border. Due to FDA working hours, the trailer may wait over-night before departing. Depending on port selection and time of day, it can take anywhere from 2 to 6 hours before the truck arrives at the border.

2 – 6 hrs.

12 CBP and FDA processes

A food shipment must be inspected by the FDA. The border crossing process usually takes 2 hours.

120 min.

13 Drive to I-house

The USDA meat inspection facility must be within the port limits. Limits vary somewhat by geography, but are generally within 25 miles of the actual border crossing. The drive generally takes 15 minutes.

15 min.

14 USDA I-house After leaving the CBP compound, the truck must go to the designated USDA meat inspection facility. The Health Certificate will be stamped and signed, and faxed to the exporter. Many inspections are “skip inspections”, but there is an allowance of 4 hours for a complete inspection.

240 min.

Information Flow

1 Plan order Planner gets requirements report from MRP system, and checks availability in SAP. Use Excel to line up individual shipments. Email file to Transportation Coordinator.

15 min.

2 Assign Health Certificate number

Each truck load has a unique Health Certificate number assigned.

5 min.

3 Notify Transportation Coordinator notifies third party logistics of impending meat shipment. Sends an email to the Warehouse Supervisor with line-up and planned shipping time.

5 min.

4 Create and print pick list; stage in SAP

Warehouse Supervisor uses the warehouse system to create and print a pick list. A lift truck driver is assigned to pick an order. As the order is picked, the lift truck driver scans each pallet. Once picked, the load is staged in SAP, thus removing it from available product.

60 min.


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5 Print stickers Printing of the stickers takes about 80 minutes. One sticker is printed per case, and one additional is printed for the Health Certificate.

80 min.

6 Print Health certificates

The CFIA Health Certificate and other documents are printed, and the load sticker is applied.

60 – 120 minutes

7 Sign and stamp documents

The CFIA inspector signs and stamps the inspection sign-off sheet. Included in the inspection paperwork are Form 9540, Annexes pertaining to bovine, chicken, and other meats, and US Certificates. The Health Certificate is sent by courier to a CFIA appointed veterinarian for a signature. It usually takes 3 hours to get the signed document back

3 hours

8 Order trailer The Transportation Coordinator is notified that the order is complete. The third party logistics provider is notified to deliver a trailer; the bill of lading number is provided.

10 min.

9 Prepare documents

Once loaded, conveyance information is transmitted to the Transportation Coordinator. The Transportation Coordinator prepares the required paperwork: - Carrier and trailer information - Seal number - Commercial invoice (NAFTA Form 1) x 3 copies - VICS bill of lading x 1 copy - A blank FDA pre-arrival form (which the carrier will use to schedule an appointment with the FDA for inspection at the border) - Form 9540 Notification of Meat Shipment - US Health Certificate - A pallet sticker (for IIT purposes) The relevant information is faxed to the carrier and broker, for preparation of entry data and eManifest. The carrier schedules appointments with the FDA and USDA. A copy of the paperwork is also handed to the driver.

15 min.

Timing Summary

1 Touch-time 680 minutes, of which 600 are for stickering and border inspections (CBP, FDA, USDA)

2 Queue time 49 – 52 hours, including 48 hours spent waiting for the availability of the CFIA inspector


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3 Transport time 2.25 – 18.25 hours, depending on which port is chosen, and when the trailer is loaded. If the FDA is not available for inspection, the trailer will be held at the terminal over-night.

4 Delay Delays are caused by the various mandatory activities and inspections, and it can be as long as 64 hours.


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4. Key Findings

The following are the categorized key findings from interviews and other data collected from Company 4.

4.1 Summary

1) Shipping Steps / Wait Time

2) Regulatory Requirements/ Issues

3) Logistics Related Issues

4) Security Issues

5) Existing Programs & Initiatives to Address Issues

6) Compliance Cost Data

7) Observations / Gaps

Compliance Documentation Appears to be Excessive and Sometimes Duplicative

Applying Stickers to Meat Shipment Cases vs. Pallets

CFIA Inspection Process Requires Company 4 to Obtain a Veterinary Sign-Off of the Onsite CFIA Inspector

CBP Officer Training, Experience and Port Inconsistency

Duplication of Food Inspection in Canada and U.S.

Lacey Act Requirements

Meat Inspection Precludes the Use of Rail

FDA Shipments Restricted from Changing Ports

No Significant Issues Noted

FAST Drivers Very Successful

Adjustments to Comply with FDA Requirement

FDA Hours of Operations

Universal Port Code is Not Working

Inter-Agency Communication Compatibility is Non-Existent

DFAIT $15 Fee for Processed Fruit and Vegetables

4.2 Findings

4.2.1 Shipping Steps / Wait Time

Compliance Documentation Appears to be Excessive and Sometimes Duplicative Programs continue to experience add-ons that require additional compliance documents. In some instances the same data must be communicated to two separate agencies that have respectively different authority at the border.


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Applying Stickers to Meat Shipment Cases vs. Pallets Company 4’s internal information system incorporates the ability for full traceability for every container, case, batch, and pallet. Previously a sticker/placard was placed on a pallet to denote manufacture country, facility and shipment. Apparently US agencies being concerned with pallets being broken down during distribution subsequently required each individual case to have stickers. The stickering process is extremely costly to Company 4 and a review should be held to return to a single sticker/placard per pallet coupled with the full traceability. The justification for stickering each case should be determined from USDA.

CFIA Inspection Process Requires Company 4 to Obtain a Veterinary Sign-Off of the Onsite CFIA Inspector This takes 3 hours and requires a 2-way courier service from Company 4 to the CFIA veterinary office for every meat shipment.

CBP Officer Training, Experience and Port Inconsistency Experienced border users find that individual officers are not conversant or familiar with a number of policies and procedures, and therefore result in extended discussions and delays in which the border user is correct. It is apparent that training of new officers can be improved. Port management varies with respect to utilization of standard policies and procedures.

On occasion, a CBP officer will inadvertently take the meat certificate from a driver’s packet and retain it. When the driver reaches the inspection house, the shipment is at a trade stop for a minimum 24 hour delay that requires the company to acquire an “in-lieu of” certificate signed by the veterinarian and couriered to the border to allow truck to proceed. (Extremely rare; last occurrence was over two years ago.)

4.2.2 Regulatory Requirements/Issues

Duplication of Food Inspection in Canada and U.S. CFIA inspects at the plant and is inspected six hours later by USDA at the border inspection house after it has been transported on a security bolt sealed trailer where no intrusion has occurred. Company 4’s internal record-keeping provides complete traceability. Why is a duplicate inspection required?

Lacey Act Requirements The Lacey Act (part of U.S. Farm Act) requires labelling of genus, species, and country of origin of every wood product. This goes in effect April 1, 2009 for Lumber and Furniture; July 1, 2009 for Pulp, Paper, Paper Products, Musical Instruments; September 30, 2009 for Oil Seeds, Cork, Toys, Games, Sports Equipment.


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4.2.3 Logistics Related Issues

Meat Inspection Precludes the Use of Rail Authorized meat inspection houses are solely located at highways near border locations precluding the use of rail as an alternative mode of transportation.

FDA Shipments Restricted from Changing Ports FDA shipments are limited to arrive at the CBP Port of Entry specifically submitted in the eManifest. In situations of weather, accidents or extensive queues at a particular port, a carrier may want to divert to an alternative port but cannot do so if carrying an FDA shipment.

4.2.4 Security Issues

No significant security issues were noted at the Canada/U.S. border.

4.2.5 Existing Programs & Initiatives to Address Issues

FAST Drivers Very Successful The carriers used are registered FAST members with FAST drivers and results in essentially all trucks being cleared at Primary.

4.2.6 Compliance Cost Data

Adjustments to Comply with FDA Requirements Company 4 had a primary team of 9 full-time people for 3 year period to convert company systems to comply with Bioterrorism Act requirements.

The continuing additions to or adjustments of U.S. regulations affecting the border related to the trusted shipper programs require extensive additive costs.

FDA Hours of Operations The stringent requirements for FDA inspection involvement at the border results in shipments being delayed or detained if trucks arrive at the border outside of FDA’s limited hours of operation (typically 9:00am to late afternoon, Monday through Friday). In the instance of Company 4 and its shipping schedule, every FDA shipment is detained at the border resulting in 24-hour delays in delivery.


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Universal Port Code is Not Working Under the ACE initiative, the intended outcome was that once a trip code was inputted into the system, it could arrive at essentially any commercial U.S. port of entry (Universal Port Code). This was a top priority of border users, was highly anticipated and extremely cost effective. Unfortunately, the Universal Port Code is not accepted at some ports and results in carriers inputting multiple eManifests for different ports for the same shipment. Upon arrival by the carrier, it leaves orphaned eManifests that must be removed and reconciled at a cost to the broker. Further, if a truck arrives at a port different than what is stated in the system, it is very costly in time entry and, in some cases, entry is denied.

Implementation of APHIS Fee from Canada into U.S. The Animal Plant Health Inspection Service fee is being collected at the physical border rather than an off border charge or budget line for CBP.

4.2.7 Observations

Inter-Agency Communication Compatibility is Non-Existent The U.S. international trade data system (ITDS) is not fully operational and the other governmental departments (OGD) initiative in Canada is in the early stages only.

4.3 Quantitative Results

As noted previously, the data review for the value stream map was based on one year (2008) of data associated with shipments:

Description Frequency per Year

Shipments to the U.S. (trucks at full truck load)

300

Individual product to the U.S. (product in cases on pallets in trucks)

185 million

Non-meat shipments (no delays) 240 Meat shipments (meat certificate and inspection facility delays)

60


8 July 2009

20

5. Border Crossing Costs

Border-related costs, which are quantified on an annual basis for Company 4, can be categorized into one of two groups: compliance costs and other costs (i.e., due to delays, etc.).

Compliance costs consist of the number of full-time equivalents (FTEs) employed by Company 4 to prepare skids of food product for shipment. Company 4 employs staff to complete documentation, for export coordination and to physically label every single case (not pallet) of its product in order to comply with U.S. border and food safety requirements. This excludes the cost of the service provider for when the goods physically arrive at the border. Fortunately, Company 4 ships mostly full truck load and less than five shipments per truck if less than truck load (i.e., proportionally small number of shipments given the volume of product shipped).

Other costs have been incurred to adjust to U.S. Bioterrorism Act requirements. A number of staff has spent several years to adjust to the requirements and to set up the system for CFIA inspections and appropriate documentation and labelling. Virtually no border delays have been reported at inspection facility at the border with all documentation, certificates and labelling completed correctly so that trucks can be waved through.

Category Cost Drivers FTEs Cost*

Compliance Company 4 has a number of employees to complete border crossing documentation, export coordination and product labelling.

3 $210,000

Other - Adjusting for Bioterrorism Act requirements

This has taken approximately three years of 4-5 personnel’s time.

4.5 $315,000

Annual Total 7.5 $525,000

* The assumed cost of an FTE for Company 4 is $70,000.

Prepared by InterVISTAS Consulting Inc.

Airport Square – Suite 550 1200 West 73rd Avenue

Vancouver, BC Canada V6P 6G5

Telephone: 604-717-1800 Facsimile: 604-717-1818

www.intervistas.com

Documents

Cross-Border Flow Analysis - Case Study for Food Processing Industry